When buying a home, you must plan for all costs, including the closing costs, which home buyers and sellers often overlook. Here's helpful information on how to budget for these costs.

What are Closing Costs?

Closing or settlement fees are expenses associated with buying or selling a home. The amount varies based on the purchase price and financing. Some costs are paid by the buyer, some by the seller. Taxes and insurance are non-negotiable, but you can negotiate other fees depending on local customs.

Closing Costs

Typical Fees You May Encounter

Your lender must disclose a Good Faith Estimate of all settlement costs. The title company or other entity conducting the closing will tell you the required amount to bring to settlement. Here are typical fees you may encounter:

  • Down payment
  • Lender origination fees
  • Appraisal fees
  • Survey fees
  • Credit report fees
  • Deed recording fees
  • Notary fees
  • Attorney fees
  • Underwriting fees
  • Title insurance policy premiums
  • Inspection fees (building, termite, etc.)
  • Private mortgage insurance premium
  • Insurance escrow for homeowners insurance.
  • Property tax escrow, if being paid as part of the mortgage
  • Points or loan discount fees you pay to receive a lower interest rate
  • Prorations for your share of costs, such as utility bills and property taxes

Notes:

Lenders keep funds for taxes and insurance in escrow accounts that you may pay with the mortgage, and then they pay the insurance or taxes for you. Note: when financing more than 80% (LTV), escrowed property taxes and insurance are required, which will increase your monthly mortgage payment. 

About prorations – At the closing, certain costs are often prorated (or distributed) between buyer and seller. Because such fees are due monthly or yearly, you might have to pay a bill for services the sellers use before they move. Proration is a way for the sellers to pay you back or for you to pay them for bills they may have paid in advance. The most common prorations are for property taxes. They are typically due at the end of the year they are assessed. Thus, if a house sells in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year, so to make this situation more equitable, they prorate the taxes. In this example, the sellers will credit the buyers for half the taxes at closing.

Make Sure You’re Prepared To Close

When buying a home, it's important to know all the costs involved, including the down payment and closing costs. Partnering with a trusted team of real estate professionals can help you understand the costs, prepare accordingly, and have a go-to resource for any questions that may arise. If you have any questions about closing costs, feel free to message me.

 

Eric Slifkin, Broker Associate

Eric Slifkin, Team Lead

Your local real estate expert

Contact us today to learn more about home buying and closing, or call us at 772-678-1600 for immediate service.

Whether you are buying or selling a home on the Treasure Coast, we are always happy to meet with you to discuss your wants and needs without obligation.

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